Non-fungible tokens may be revolutionizing the way we own and transact with digital assets in the 21st century, but they’re no different than old-school physical assets in one important way: They’re governed by a legal framework which, in many respects, is rooted in the 20th century.
One area, in particular, rife with uncertainty is the intersection of NFTs and intellectual property law. Federal copyright and trademark laws were not written with NFTs in mind, which means that it’s up to the courts to adjudicate disputes pursuant to existing laws until revised federal statutes are enacted.
In the meantime, let’s review some of the most interesting and important IP legal issues that are currently impacting the creation, transfer and use of NFTs.
Trademark infringement and NFTs as artistic expression
One of the most closely followed IP and NFT cases currently being litigated involves a lawsuit brought by Hermès against artist Mason Rothschild over a collection of 100 “MetaBirkin” NFTs — handbags for the digital world — he created that Hermès alleges violate its trademark.
Rothschild sought dismissal of the case, arguing that the NFTs he minted and sold (for tens of thousands of dollars) were merely a form of artistic expression protected under the First Amendment to the U.S. Constitution — like Andy Warhol’s use of Campbell Soup labels in his art.
For NFT creators, it’s important to think through and document what, if any, IP rights they want transferred as part of the sale.
While this case still has a long way to go until a final resolution — provided it doesn’t settle in the interim — the U.S. District Court presiding over it recently gave us a glimpse into how courts may interpret trademark claims and defenses involving NFTs.
In denying Rothschild’s motion to dismiss Hermès’ lawsuit, the court explained that while Rothschild’s creation of the bags could constitute a form of artistic expression, there was not sufficient cause to dismiss Hermès’ lawsuit. The case marches on, possibly to trial.
The court relied upon a well-established body of prior cases — not involving NFTs — to reach its decision. It noted that “Rothschild’s use of NFTs to authenticate the images,” as opposed to merely selling a digital image not minted as an NFT, doesn’t change the way the artistic expression defense should be analyzed under existing law.